TWENTYFOUR INCOME FUND LIMITED
INTERIM MANAGEMENT REPORT AND
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
For the period from 1 April 2017 to 30
September 2017
LEI: 549300CCEV00IH2SU369
(Classified Regulated Information, under DTR 6 Annex 1 section
1.2)
The Company has today, in accordance with DTR 6.3.5, released
its Interim Management Report and Unaudited Condensed Financial
Statements for the period ended 30 September
2017. The Report will shortly be available via the
Company's Portfolio Manager’s website www.twentyfouram.com and
will shortly be available for inspection online at
www.morningstar.co.uk/uk/NSM website.
SUMMARY INFORMATION
The Company
TwentyFour Income Fund Limited (the “Company”) was incorporated
with limited liability in Guernsey, as a closed-ended investment
company on 11 January 2013. The
Company’s shares were listed with a Premium Listing on the Official
List of the UK Listing Authority and admitted to trading on the
Main Market of the London Stock Exchange on 6 March 2013.
Investment Objective and Investment Policy
The Company’s investment objective is to generate attractive
risk adjusted returns principally through income distributions.
The Company’s investment policy is to invest in a diversified
portfolio of UK and European Asset Backed Securities.
The Company will maintain a Portfolio diversified by issuer, it
being anticipated that the Portfolio will comprise at least 50
Asset Backed Securities at all times.
The Portfolio must comply, as at each date an investment is
made, with the following restrictions:
(i) no more than 20% of the
Portfolio value will be backed by collateral in any single country
(save that this restriction will not apply to Northern European
countries); and
(ii) no more than 5% of the Portfolio
value will be exposed to any single Asset Backed Security or issuer
of Asset Backed Securities; and
(iii) no more than 10% of the Portfolio value
will be exposed in aggregate to instruments not deemed securities
for the purposes of FSMA.
As an exception to the requirements set out above the Portfolio
Manager is permitted to purchase new investments at any time when
the Portfolio does not comply with one or more of those
restrictions so long as, at the time of investment:
- the asset purchased will be
compliant with the single country restriction above (even where
following the purchase more than 20% of the Portfolio will be
backed by collateral in another single country due to market
movements);
- the asset purchased will be
compliant with the single Asset Backed Security/issuer exposure
restriction above (even where following the purchase more than 5%
of the Portfolio value will be exposed to another single Asset
Backed Security or issuer due to market movements); and
- such purchase does not make the
Portfolio, in aggregate, less compliant with any of (i), (ii) and
(iii) above.
The Company will not employ gearing or derivatives for
investment purposes. The Company may use borrowing for short-term
liquidity purposes, which could be achieved through a loan facility
or other types of collateralised borrowing instruments including
repurchase transactions and stock lending. The Directors will
restrict the borrowings of the Company to 10% of the Company’s Net
Asset Value (“NAV”) at the time of drawdown.
Target Returns
The Company has a target annual net total return on the
Company’s NAV of between 6% and 9% per annum, which includes
quarterly dividends with a target yield each financial year of 6%
or higher, of the Issue Price.*
Shareholder Information
Northern Trust International Fund Administration Services
(Guernsey) Limited (the “Administrator”) is responsible for
calculating the NAV per share of the Company. The unaudited NAV per
ordinary redeemable share will be calculated as at the close of
business on the last business day of every week and the last
business day of every month by the Administrator and will be
announced by a Regulatory News Service the following business
day.
Financial Highlights
|
|
|
|
For
the period |
For
the |
For
the period |
|
|
|
|
from
01.04.17 |
year
ended |
from
01.04.16 |
|
|
|
|
to
30.09.17 |
31.03.17 |
to
30.09.16 |
Total Net
Assets at period/year end |
£461,351,150 |
£452,612,049 |
£421,430,858 |
Net Asset
Value per share at period/year end |
116.56p |
114.35p |
110.23p |
Share
price at period/year end |
|
117.75p |
119.25p |
112.00p |
Premium to
Net Asset Value at period/year end |
1.02% |
4.29% |
1.61% |
Dividends
declared in respect of the period/year end |
3.00p |
6.99p |
3.00p |
As at 15 November 2017, the
premium had moved to 2.98%. The estimated NAV per share and
mid-market share price stood at 116.52p and 119.99p
respectively.
Ongoing Charges
Ongoing charges for the period ended 30
September 2017 have been calculated in accordance with the
Association of Investment Companies (the “AIC”) recommended
methodology. The ongoing charges for the period ended 30 September 2017 were 0.90% (30 September 2016: 0.96%).
* The Issue Price being £1.00. This is a target only and not a
profit forecast. There can be no assurance that this target will be
met or that the Company will make any distributions at all. This
target return should not be taken as an indication of the Company’s
expected or actual current or future results. The Company’s actual
return will depend upon a number of factors, including the number
of Ordinary Shares outstanding and the Company’s total expense
ratio. Potential investors should decide for themselves whether or
not the return is reasonable and achievable in deciding whether to
invest in or retain or increase their investment in the Company.
Further details on the Company’s financial risk management can be
found in note 16 of the Company’s Annual Financial Statements for
the year ended 31 March 2017, which
can be found on the Company’s website
(www.twentyfourincomefund.com).
CHAIRMAN’S STATEMENT
for the period from 1 April 2017 to
30 September 2017
I am pleased to present my report on the Company’s progress for
the six month period ending
30 September 2017.
For the majority of the period the Company’s shares continued to
trade at a premium, as they had done since launch, with the average
premium during the period being 3.05%. However this narrowed during
the second quarter, trading briefly at a discount in September,
before rallying back to a 1% premium at the end of the period. The
Board is willing to continue to authorise the issuance of further
shares as a premium management mechanism, whilst the Portfolio
Manager can confirm that attractive investment opportunities are
available in the market. It should be noted that during the 6
months to 30 September 2017, no new
shares were issued, despite the shares trading up to, and above, a
5% premium, reflecting the Manager’s view that the opportunity to
acquire assets on an accretive basis to the portfolio, did not
exist.
The Net Asset Value (“NAV”) total return on the shares from
launch to 30 September 2017 was
50.18% (including dividends paid). The NAV per Share rose 5.55%
(including dividends paid) during the period, and the income
component of the return to investors remained strong as the Company
declared two dividends of 1.5p per share, to cover the pro-rata
minimum annual distribution of 6p per share, with a third dividend
of 1.5p and a final dividend covering all excess returns per share
in respect of the year expected to be paid in the second half of
the Company’s financial year.
The NAV performance of the Company has been pleasingly
consistent over the past six months, benefitting from the strong
fundamental performance across the markets the Company invests in,
stable ratings, and the strong technical support provided by the
mismatch between demand and supply.
In addition the recent speculation around central bank policy at
the Federal Reserve Bank (the “Fed”), European Central Bank
(“ECB”) and Bank of England has been of interest, highlighting the
stability provided by the floating rate nature of the portfolio.
While it is unlikely that we will see a significant number of rate
rises in the next 12 months, we will see some direct benefit
through LIBOR reacting to changes in the Bank of England Base Rate,
and in the meantime we have avoided a significant amount of the NAV
volatility that fixed rate securities have suffered via interest
rate duration.
The ongoing investment opportunity remains attractive,
particularly in light of the lower yield environment in most
comparable asset classes. While risks to market sentiment do exist,
these appear largely to be external to the European Asset Backed
Securities (“ABS”) market, and as we have seen before, when they
become significant enough to push volatility into the ABS market
this tends to be short-lived and the Company’s NAV typically enjoys
a strong recovery. I remain confident of the Company’s ability to
fulfil its objectives.
Trevor Ash
Chairman
15 November 2017
PORTFOLIO MANAGER’S REPORT
for the period from 1 April 2017
to 30 September 2017
Market Commentary
The six month period to 30 September
2017 was largely benign in terms of performance,
characterised by low relative levels of volatility, and consistent
NAV appreciation. During the period the Company’s NAV per Share
increased 2.21p while the Share Price decreased by 1.50p, and
dividends for the period totalled 3p.
Throughout the period most markets have principally been
focussed on politics, central banks and market technicals. The
trend of populist politics has been at the forefront of the mind
since mid-2016 with the Brexit referendum and then the US
presidential election. As the period opened, elections had been
held in the Netherlands, and while the potential for a far-right
government was avoided, the subsequent elections in France saw a
greater chance of a victory for Marine Le Pen’s Front National.
Again the result was favourable for markets, but the uncertainty
caused by such events certainly dominated the headlines and the
minds of investors. In contrast the snap election in the UK did not
bring the result expected at the start, and the precarious nature
of the Conservative Party’s hold on power, plus the infighting
within the party, will continue to create headlines.
Political events were not limited to electoral risk however;
Brexit negotiations started following the triggering of Article 50
in March, and progress during the six months in question was slow
enough to force Prime Minister May to attempt to reset the tone
with her speech in Florence at the end of the period. On a more
global basis the ongoing issues of the Trump administration have
covered, but not been limited to, Russian interference in the
election, the sacking of the head of the FBI, the inability to pass
any major legislation, significant turnover in senior personnel at
the White House and the escalating conflict with North Korea over
its nuclear missile capability.
Central bank policy has also been a material driver of some
markets over the period, principally driven by changing
expectations around the tightening of monetary policy and the
reduction of stimulus measures. The coordinated global recovery,
low levels of unemployment and bullish markets have pushed the Fed
to raise rates and start shrinking the size of their balance sheet,
and the clear expectation at the end of the period is that the Bank
of England and the ECB will follow suit by raising rates and
tapering Quantitative Easing respectively. The expectation, driven
by the rhetoric coming out of the central banks, has created
significant volatility across sovereign and corporate bond markets
as yield curves have moved in response.
During the first quarter of the calendar year the European ABS
market had been characterised by low new issuance volumes of
non-AAA rated paper. This lack of supply continued and has been the
main driver of market performance over the period, as demand
materially outweighed supply, and this became a theme for the six
month period in question. This technical strength has been
supported by strong performance of the underlying assets that the
investments are backed by, which has consistently led to stable or
upgraded ratings across the majority of sectors the Company is
exposed to. This strong demand and excellent fundamentals have
allowed investors to look past the political risk and central bank
noise. This appetite for European ABS drove the primary market to
surprising levels of issuance through an abnormally busy July and
even into the first half of August. The secondary market has been
characterised by good liquidity and material competition for
bonds.
Market Outlook
Sentiment in the ABS market is clearly bullish, and the
expectation is for performance to continue in this manner for the
rest of 2017. On a long term basis, additional support will come
with the adoption of standardised requirements for high quality
transactions that will attract in the current lower capital
weightings of institutional investors, thus increasing demand.
The ABS market is expecting that there will be more supply going
forward as schemes such as the ECB’s ABS Purchase Programme tapers,
and as the Bank of England’s Term Funding Scheme comes to an end,
which will partly offset the additional appetite for bonds.
Brexit negotiations have disappointed so far, and while Brexit
itself is not going to be positive for the UK over the short to
medium term, it is highly unlikely that it will create the degree
of fundamental issues that will have investors questioning whether
most UK ABS deals can pay coupons or will ultimately redeem
principal at par. It is important to remember that these deals
performed largely as expected through the global financial crisis,
which saw material spikes in unemployment and drops in asset
values.
However the ABS market does not operate entirely in isolation,
and while the presence of external risk events, such as the
elections in France, have lessened, the Portfolio Manager continues
to monitor the most likely causes of wider market volatility for
any signs of contamination.
Foreign Exchange Accounting
The Company’s policy is to hedge foreign exchange risk. During
the six month period, the Company held Euro and Sterling
denominated assets and while the EUR/GBP exchange rate finished
3.3% higher at the end of the period, the exchange rate was
relatively volatile and experienced moves in the range of 11.2%
during the six months.
Currency risk is hedged using “rolling forwards” with a one
month maturity, selling forward a notional amount equivalent to the
market value of the assets. Any movements in foreign exchange rates
are monitored daily and the hedge is adjusted when necessary to
ensure that currency exposure remains within strict limits. The
Company operates to a tolerance of +/-0.50% exposure to the NAV on
each non-GBP currency. The Company has significant exposure to Euro
assets, representing 62% of the Investment Portfolio at the end of
the period, and which remained fully hedged within these tolerances
during this time. Foreign Exchange hedging is used to manage the
portfolio’s currency risk efficiently and not to enhance investment
returns.
The net foreign currency gain on the portfolio (recorded within
net gains on financial assets at fair value through profit or loss)
and the net foreign currency losses on the forward currency
contracts (included within net foreign currency losses) are
recognised in accordance with the hedging policy and International
Financial Reporting Standards, within the Unaudited Condensed
Statement of Comprehensive Income.
TwentyFour Asset Management
15 November 2017
TOP TWENTY HOLDINGS
As at 30 September 2017
|
|
|
|
|
|
|
Percentage of |
|
Nominal/ |
|
Asset Backed
Security |
|
Fair
Value |
|
Net
Asset |
Security |
Shares |
|
Sector |
|
£ |
|
Value |
SCGC 2015-1 E |
15,000,000 |
|
Consumer ABS |
|
14,734,733 |
|
3.19 |
CBFLU 1 MEZZ |
14,000,000 |
|
Buy-to-Let RMBS |
|
14,070,000 |
|
3.05 |
TPMF 2017-A11X A1 |
11,076,404 |
|
Buy-to-Let RMBS |
|
11,100,440 |
|
2.41 |
INTS 3 C |
12,450,000 |
|
Prime RMBS |
|
10,741,084 |
|
2.33 |
WARW 1 E |
10,500,000 |
|
Non-Conforming
RMBS |
|
10,399,515 |
|
2.25 |
WARW 2 E |
9,250,000 |
|
Non-Conforming
RMBS |
|
9,182,690 |
|
1.99 |
TPMF 2016-GR1X E |
9,000,000 |
|
Prime RMBS |
|
9,155,430 |
|
1.98 |
WARW 1 D |
8,200,000 |
|
Non-Conforming
RMBS |
|
8,152,440 |
|
1.77 |
HLAE 2016-1X E |
8,900,000 |
|
Leveraged Loan
CLO |
|
8,010,812 |
|
1.74 |
PARGN 15X CB |
10,000,000 |
|
Buy-to-Let RMBS |
|
7,527,256 |
|
1.63 |
SCGC 2016-1 E |
7,500,000 |
|
Consumer ABS |
|
7,290,116 |
|
1.58 |
ALME 3X FRNE |
7,500,000 |
|
Leveraged Loan
CLO |
|
6,632,044 |
|
1.44 |
DRYD 2017-27X E |
7,500,000 |
|
Leveraged Loan
CLO |
|
6,613,073 |
|
1.43 |
RMACS 2006-NS3X
B1C |
8,792,084 |
|
Non-Conforming
RMBS |
|
6,552,250 |
|
1.42 |
AVOCA 16X E |
7,250,000 |
|
Leveraged Loan
CLO |
|
6,509,089 |
|
1.41 |
RMS 28 E |
6,250,000 |
|
Non-Conforming
RMBS |
|
6,402,271 |
|
1.39 |
CASSA 2007-1 B |
7,500,000 |
|
Prime RMBS |
|
6,223,964 |
|
1.35 |
AURUS 2017-1 G |
7,000,000 |
|
Consumer ABS |
|
6,218,778 |
|
1.35 |
STNLT 2017-1 A |
6,125,277 |
|
Non-Conforming
RMBS |
|
6,177,342 |
|
1.34 |
DRYD 2015-44X F |
6,800,000 |
|
Leveraged Loan
CLO |
|
6,090,790 |
|
1.32 |
|
|
|
|
|
|
|
|
|
BOARD MEMBERS
Biographical details of the Directors are as follows:
Trevor Ash – (Chairman) (age 71)
Mr Ash is a resident of Guernsey and has over 30 years of
investment experience. He is a Fellow of the Chartered Institute
for Securities and Investment. He was formerly a managing director
of Rothschild Asset Management (CI) Limited. Mr Ash retired as a
director of NM Rothschild & Sons (CI) Limited, the banking arm
of the Rothschild Group in the Channel Islands in 1999. Since
retirement, he has acted as a director of a number of hedge funds,
fund of hedge funds, venture capital, derivative and other offshore
funds including several managed or advised by Insight, JP Morgan
and Merrill Lynch. Mr Ash was appointed to the Board on
11 January 2013.
Ian Burns – (Non-executive Director and Chairman of
the Audit Committee) (age 58)
Mr Burns is a resident of Guernsey and a fellow of the Institute
of Chartered Accountants in England and Wales and a member of the
Society of Trust and Estate Planners. He is a founder and Executive
Director of Via Executive Limited, a specialist management
consulting company and managing director of Regent Mercantile
Holdings Limited, a privately owned investment company. Mr Burns is
currently a non-executive director of London listed River and
Mercantile UK Micro Cap Limited and Fast Forward Innovations
Limited (AIM) and a number of private investment funds. Mr Burns
was appointed to the Board on 17 January
2013.
Richard Burwood – (Non-executive Director) (age
50)
Mr Burwood is a resident of Guernsey with over 25 years’
experience in banking and investment management. During 18 years
with Citibank London, Mr Burwood spent 11 years as a fixed income
portfolio manager spanning both banks/finance investments and Asset
Backed Securities. He gained direct experience as a portfolio
manager of securities backed by mortgages, auto loans and
collateralised loan obligations. Mr Burwood has lived in Guernsey
since 2010, initially working as a portfolio manager for EFG
Financial Products (Guernsey) Ltd, managing the treasury
department’s ALCO Fixed Income portfolio. From 2011 to 2013, Mr
Burwood worked as the Business and Investment Manager for the
Guernsey branch of Man Investments (CH) AG. This role involved
overseeing all aspects of the business including operations and
management of proprietary investments. In January 2014, Mr Burwood joined the board of
RoundShield Fund I GP Ltd, a Guernsey private equity fund, focused
on European small to mid-cap opportunities. In August 2015, he became a Board Member of Funding
Circle SME Income Fund Ltd, a Guernsey Company, offering investors
access to a diversified pool of SME loans originated through
Funding Circle’s marketplaces in the UK, US and Europe. Mr Burwood
was appointed to the Board on 17 January
2013.
Jeannette (Jan) Etherden – (Non-executive Director)
(age 57)
Ms Etherden is a resident of the United Kingdom, with over 30
years’ experience in the investment industry as an analyst, a fund
manager, then a non-executive director. Previously head of UK
equities for Confederation Life / Sun Life of Canada, she joined
Newton in 1996 as a director specialising in multi-asset segregated
portfolios and was also their Investment COO from 1999 to 2001.
Subsequently she worked with Olympus Capital Management as business
development manager for specialist hedge fund product. She is a
director of Miton UK MicroCap Trust plc and of LXI REIT plc. Ms
Etherden was appointed to the Board on 17
January 2013.
STATEMENT OF PRINCIPAL RISKS AND
UNCERTAINTIES
The Company’s assets are mainly comprised of Asset Backed
Securities carrying exposure to risks related to the underlying
assets backing the security or the originator of the security. The
Company’s principal risks are therefore market or economic in
nature.
The principal risks and uncertainties assessed by the Board
relating to the Company were disclosed in the Annual Report and
Audited Financial Statements for the year ended 31 March 2017. The principal risks disclosed can
be divided into the various areas as follows:
• Market
risk
Market risk is risk associated with changes in market prices
including spreads, interest rates, economic uncertainty, changes in
laws and national and international political circumstances.
•
Reinvestment risk
Reinvestment risk is the risk that any monies resulting from
principal and income payments from a bond will not be reinvested at
the prevailing interest rate when the bond was initially
purchased.
• Credit
risk
The investment portfolio is comprised of Asset Backed Securities
which expose the Company to credit risk, being the risk that a
counterparty will default on its contractual obligations resulting
in financial loss to the Company.
•
Liquidity risk
Liquidity risk is that the Company does not have sufficient cash
resources to meet obligations, including the dividend target, as
they fall due or can only do so on terms that are materially
disadvantageous.
• Foreign
currency risk
Foreign currency risk is the risk that the value of a financial
instrument will fluctuate due to changes in foreign exchange rates.
The Company is exposed to foreign currency risk through its
investment in predominately Euro denominated assets although
mitigates this risk through hedging.
A detailed explanation of these can be found in note 16 of the
Annual Report. The Board and Portfolio Manager do not consider
these risks to have changed and these risks are considered to
remain relevant for the remaining six months of the financial
year.
Related Parties
Related party balances and transactions are disclosed in note 13
of these unaudited condensed interim financial statements.
Going Concern
Under the 2016 UK Corporate Governance Code (effective for
periods beginning on or after 17 June 2016) and
applicable regulations, the Directors are required to satisfy
themselves that it is reasonable to assume that the Company is a
going concern and to identify any material uncertainties to the
Company’s ability to continue as a going concern for at least 12
months from the date of approving the financial statements.
The Directors believe that it is appropriate to continue to
adopt a going concern basis in preparing the Interim Report and
Unaudited Condensed Interim Financial Statements given the
Company’s holdings of cash and cash equivalents, the liquidity of
investments and the income deriving from those investments, meaning
the Company has adequate financial resources to meet its
liabilities as they fall due over a period of 12 months from the
approval of the financial statements.
DIRECTORS’ RESPONSIBILITY
STATEMENT
We confirm that to the best of our knowledge:
• these
Unaudited Condensed Interim Financial Statements have been prepared
in accordance with International Accounting Standard 34, "Interim
Financial Reporting" and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
as required by DTR 4.2.4R.
• the interim
management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have occurred during
the period from 1 April 2017 to
30 September 2017 and their impact on
the Unaudited Condensed Interim Financial Statements; and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules,
being related party transactions that have taken place during the
period from 1 April 2017 to
30 September 2017 and that have
materially affected the financial position or performance of the
Company during that period as included in note 13.
By order of the Board
Trevor Ash
Chairman
Ian Burns
Director
15 November
2017
INDEPENDENT REVIEW REPORT
TO TWENTYFOUR INCOME FUND LIMITED
Our conclusion
We have reviewed the accompanying condensed interim financial
information of TwentyFour Income Fund Limited (the “Company”) as of
30 September 2017. Based on our
review, nothing has come to our attention that causes us to believe
that the accompanying condensed interim financial information is
not prepared, in all material respects, in accordance with
International Accounting Standard 34, ‘Interim Financial
Reporting’, and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority.
What we have reviewed
The accompanying condensed interim financial information
comprise:
- the condensed interim statement
of financial position as of 30 September
2017;
- the condensed statement of
comprehensive income for the six month period then ended;
- the condensed statement of
changes in equity for the six month period then ended;
- the condensed statement of cash
flows for the six month period then ended; and
- the notes, comprising a summary
of significant accounting policies and other explanatory
information.
The condensed interim financial information has been prepared in
accordance with International Accounting Standard 34, ‘Interim
Financial Reporting’, and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom’s Financial Conduct
Authority.
Our responsibilities and those of the
directors
The Directors are responsible for the preparation and
presentation of this condensed interim financial information in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct Authority.
Our responsibility is to express a conclusion on this condensed
interim financial information based on our review. This report,
including the conclusion, has been prepared for and only for the
Company for the purpose of complying with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom’s Financial
Conduct Authority and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of interim financial
information performed by the independent auditor of the entity'
issued by the International Auditing and Assurance Standards Board.
A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
15 November 2017
(a) The maintenance and integrity of the Company’s website
is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
UNAUDITED CONDENSED STATEMENT OF
COMPREHENSIVE INCOME
for the period from 1 April 2017
to 30 September 2017
|
|
|
|
|
For
the period from 01.04.17 to 30.09.17 |
For
the period from 01.04.16 to 30.09.16 |
|
|
|
Notes |
|
£ |
£ |
Income |
|
|
|
|
(Unaudited) |
(Unaudited) |
Interest income |
|
|
|
|
14,398,886 |
12,181,289 |
Net foreign currency
losses |
|
|
7 |
|
(8,115,300) |
(17,904,777) |
Net gains on financial
assets |
|
|
|
|
|
|
at fair value through
profit or loss |
|
|
8 |
|
20,309,231 |
34,804,266 |
Total
income |
|
|
|
|
26,592,817 |
29,080,778 |
|
|
|
|
|
|
|
Portfolio management
fees |
|
|
13 |
|
(1,696,608) |
(1,361,602) |
Directors' fees |
|
|
13 |
|
(63,750) |
(63,750) |
Administration and
secretarial fees |
|
|
14 |
|
(117,910) |
(100,161) |
Audit fees |
|
|
|
|
(25,850) |
(26,675) |
Custody fees |
|
|
14 |
|
(22,621) |
(19,929) |
Broker fees |
|
|
|
|
(17,679) |
(25,079) |
AIFM management
fees |
|
|
14 |
|
(82,823) |
(70,835) |
Depositary fees |
|
|
14 |
|
(32,017) |
(26,485) |
Other expenses |
|
|
|
|
(1,473) |
(80,319) |
Total
expenses |
|
|
|
|
(2,060,731) |
(1,774,835) |
|
|
|
|
|
|
|
Total
comprehensive income for the period |
|
|
24,532,086 |
27,305,943 |
|
|
|
|
|
|
|
Earnings per
Ordinary Redeemable |
|
|
|
|
|
|
Share - Basic &
Diluted |
|
|
3 |
|
0.062 |
0.081 |
|
|
|
|
|
|
|
|
All items in the above statement derive from continuing
operations.
The notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
as at 30 September 2017
|
|
|
30.09.2017 |
|
31.03.2017 |
Assets |
Notes |
|
£ |
|
£ |
Current
assets |
|
|
(Unaudited) |
|
(Audited) |
Financial assets at
fair value through profit and loss |
|
|
|
|
|
- Investments |
8 |
|
455,120,234 |
|
429,399,068 |
- Derivative assets:
Forward currency contracts |
16 |
|
21,753 |
|
4,173,555 |
Amounts due from
broker |
|
|
5,536,624 |
|
6,117,241 |
Other receivables |
9 |
|
2,773,685 |
|
3,177,504 |
Cash and cash
equivalents |
|
|
20,317,932 |
|
24,561,068 |
Total current
assets |
|
|
483,770,228 |
|
467,428,436 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
Financial liabilities
at fair value through profit and loss |
|
|
|
|
|
- Derivative
liabilities: Forward currency contracts |
16 |
|
116,766 |
|
163,495 |
Amounts due to
brokers |
|
|
21,258,238 |
|
14,072,249 |
Other payables |
10 |
|
1,044,074 |
|
580,643 |
Total
liabilities |
|
|
22,419,078 |
|
14,816,387 |
|
|
|
|
|
|
Net current
assets |
|
|
461,351,150 |
|
452,612,049 |
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital
account |
11 |
|
407,509,059 |
|
407,509,059 |
Retained earnings |
|
|
53,842,091 |
|
45,102,990 |
Total
equity |
|
|
461,351,150 |
|
452,612,049 |
|
|
|
|
|
|
Ordinary Redeemable
Shares in issue |
11 |
|
395,814,151 |
|
395,814,151 |
|
|
|
|
|
|
Net Asset Value per
Ordinary Redeemable Share (pence) |
5 |
|
116.56 |
|
114.35 |
The Financial Statements were approved by the Board of Directors
on 15 November 2017 and signed on its behalf by:
The notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
Trevor Ash
Chairman
Ian Burns
Director
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 April 2017 to
30 September 2017
|
|
|
Share
capital |
|
Retained |
|
|
|
|
|
account |
|
earnings |
|
Total |
|
|
Note |
£ |
|
£ |
|
£ |
Balances at 1 April 2017 |
|
407,509,059 |
|
45,102,990 |
|
452,612,049 |
Distributions paid |
|
- |
|
(15,792,985) |
|
(15,792,985) |
Total
comprehensive gain for the period |
|
- |
|
24,532,086 |
|
24,532,086 |
Balances at 30 September 2017 (unaudited) |
|
407,509,059 |
|
53,842,091 |
|
461,351,150 |
|
|
|
|
|
|
|
|
|
|
|
Share
capital |
|
Retained |
|
|
|
|
|
account |
|
earnings |
|
Total |
|
|
Note |
£ |
|
£ |
|
£ |
Balances at 1 April 2016 |
|
327,589,440 |
|
5,821,364 |
|
333,410,804 |
Issue of
shares |
|
66,742,970 |
|
- |
|
66,742,970 |
Share
issue costs |
|
(1,062,805) |
|
- |
|
(1,062,805) |
Distributions paid |
|
- |
|
(4,966,054) |
|
(4,966,054) |
Income
equalisation on new issues |
4 |
(678,835) |
|
678,835 |
|
- |
Total
comprehensive gain for the period |
|
- |
|
27,305,943 |
|
27,305,943 |
Balances at 30 September 2016 (unaudited) |
|
392,590,770 |
|
28,840,088 |
|
421,430,858 |
The notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 April 2017 to
30 September 2017
|
Notes |
For
the period from 01.04.17 to 30.09.17 |
|
For
the period from 01.04.16 to 30.09.16 |
|
|
£ |
|
£ |
|
|
(Unaudited) |
|
(Unaudited) |
Cash flows from
operating activities |
|
|
|
|
Total comprehensive
income for the period |
|
24,532,086 |
|
27,305,943 |
|
|
|
|
|
Adjustments for: |
|
|
|
|
Net gain on
investments |
8 |
(20,309,231) |
|
(34,804,266) |
Amortisation
adjustment under effective interest rate method |
8 |
(4,532,307) |
|
(5,648,835) |
Decrease/(increase) in
other receivables |
|
403,819 |
|
(337,235) |
Increase/(decrease)
other payables |
|
463,431 |
|
(157,260) |
Unrealised
losses/(gains) on forward currency contracts |
7 |
4,105,073 |
|
(345,300) |
Increase in margin
account |
|
- |
|
(1,380,000) |
Purchase of
investments |
|
(209,928,866) |
|
(140,841,760) |
Sale of
investments |
|
216,815,844 |
|
129,462,899 |
Net cash generated
from/(used in) operating activities |
|
11,549,849 |
|
(26,745,814) |
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
Proceeds from issue of
Ordinary Redeemable Shares |
|
- |
|
63,936,720 |
Share issue costs |
|
- |
|
(1,001,778) |
Dividend
distribution |
|
(15,792,985) |
|
(12,487,646) |
Net cash
(outflow)/inflow from financing activities |
|
(15,792,985) |
|
50,447,296 |
|
|
|
|
|
(Decrease)/increase
in cash and cash equivalents |
|
(4,243,136) |
|
23,701,482 |
|
|
|
|
|
Cash and cash
equivalents at beginning of the period |
|
24,561,068 |
|
4,913,606 |
|
|
|
|
|
Cash and cash
equivalents at end of the period |
|
20,317,932 |
|
28,615,088 |
The notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL
STATEMENTS
for the period from 1 April 2017 to
30 September 2017
1. General Information
TwentyFour Income Fund Limited (the “Company”) was incorporated
with limited liability in Guernsey, as a closed-ended investment
company on 11 January 2013. The
Company’s Shares were listed with a Premium Listing on the Official
List of the UK Listing Authority and admitted to trading on the
Main Market of the London Stock Exchange on 6 March 2013.
The Company’s investment objective and policy is set out in the
Summary Information.
The Portfolio Manager of the Company is TwentyFour Asset
Management LLP (the “Portfolio Manager”).
2. Principal Accounting
Policies
a)
Statement of compliance
The Unaudited Condensed Interim Financial Statements for the
period 1 April 2017 to
30 September 2017 have been prepared
on a going concern basis in accordance with IAS 34 “Interim
Financial Reporting”, the Disclosure Guidance and Transparency
Rules Sourcebook of the United Kingdom’s Financial Conduct
Authority (“FCA”) and applicable legal and regulatory
requirements.
The Unaudited Condensed Interim Financial Statements should be
read in conjunction with the annual financial statements for the
year ended 31 March 2017, which were
prepared in accordance with International Financial Reporting
Standards (“IFRS”) and which received an unqualified auditor’s
report.
b)
Changes in accounting policy
In the current financial period, there have been no changes to
the accounting policies from those applied in the most recent
audited annual financial statements.
c) Significant judgements and
estimates
In the current financial period, there have been no changes to
the significant accounting judgements, estimates and assumptions
from those applied in the most recent audited annual financial
statements.
d) Standards, amendments and
interpretations issued but not yet effective
The following standards, interpretations and amendments, which
have not been applied in these Unaudited Condensed Interim
Financial Statements, were in issue but not yet effective:
- IFRS 9 Financial Instruments (Effective 1 January 2018)
- IFRS 15 Revenue from Contracts with Customers (Effective
1 January 2018)
The Directors anticipate that the adoption of IFRS 15 effective
in a future period will not have a material impact on the financial
statements of the Company. The Company is currently evaluating the
potential effect of IFRS 9.
3. Earnings per
Ordinary Redeemable Share - Basic & Diluted
The earnings per Ordinary Redeemable Share - Basic and Diluted
has been calculated based on the weighted average number of
Ordinary Redeemable Shares of 395,814,151
(30 September 2016: 336,678,999) and
a net gain of £24,532,086 (30 September
2016: net gain of £27,305,943).
4. Income
equalisation on new issues
In order to ensure there are no dilutive effects on earnings per
share for current shareholders when issuing new shares, earnings
are calculated in respect of accrued income at the time of purchase
and a transfer is made from share capital to income to reflect
this. The transfer for the period is £Nil as there were no share
issues (30 September 2016:
£678,835).
5. Net Asset Value
per Ordinary Redeemable Share
The net asset value of each Share of £1.17 (31 March 2017: £1.14) is determined by dividing
the net assets of the Company attributed to the Shares of
£461,351,150 (31 March 2017:
£452,612,049) by the number of Shares in issue at 30 September 2017 of 395,814,151
(31 March 2017: 395,814,151).
6. Taxation
The Company has been granted Exempt Status under the terms of
The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 to income
tax in Guernsey. Its liability for Guernsey taxation is limited to
an annual fee of £1,200 (2016: £1,200).
7. Net foreign currency
losses
|
|
|
|
|
|
|
For
the period from 01.04.17 to 30.09.17 |
For the period from 01.04.16
to 30.09.16 |
|
|
|
|
|
|
|
£ |
|
£ |
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
Movement
on unrealised (loss)/gain on forward currency contracts |
(4,105,073) |
|
345,300 |
Realised
loss on foreign currency contracts |
|
(3,906,430) |
|
(18,226,373) |
Unrealised
foreign currency loss on receivables/payables |
(75,394) |
|
(25,515) |
Unrealised
foreign currency exchange (loss)/gain on interest receivable |
(28,403) |
|
1,811 |
|
|
|
|
|
|
|
(8,115,300) |
|
(17,904,777) |
8. Investments
|
|
|
|
|
|
|
For
the period from 01.04.17 to 30.09.17 |
For the period from 01.04.16 to 31.03.17 |
Financial assets at fair value through profit or loss: |
£ |
|
£ |
Unlisted Investments: |
|
|
|
|
|
(Unaudited) |
|
(Audited) |
Opening
book cost |
|
|
|
|
|
|
400,893,973 |
|
339,411,981 |
Purchases
at cost |
|
|
|
|
|
|
217,114,855 |
|
316,045,880 |
Proceeds
on sale/principal repayment |
|
(216,235,227) |
|
(277,600,058) |
Amortisation adjustment under effective interest rate method |
4,532,307 |
|
10,247,547 |
Realised
gains on sale/principal repayment |
|
22,861,967 |
|
21,558,885 |
Realised
losses on sale/principal repayment |
|
(6,857,786) |
|
(8,770,262) |
Closing
book cost |
|
|
|
|
|
|
422,310,089 |
|
400,893,973 |
|
|
|
|
|
|
|
|
|
|
Unrealised gain on investments |
|
39,356,210 |
|
31,105,493 |
Unrealised loss on investments |
|
(6,546,065) |
|
(2,600,398) |
Fair value |
|
|
|
|
|
|
455,120,234 |
|
429,399,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company does not experience any seasonality or cyclicality
in its investment activities.
|
|
|
|
|
|
|
For
the period from 01.04.17 to 30.09.17 |
For the period from 01.04.16 to 30.09.16 |
|
|
|
|
|
|
|
£ |
|
£ |
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
Realised
gains on sale/principal repayment |
|
22,861,967 |
|
7,053,229 |
Realised
losses on sales/principal repayment |
|
(6,857,786) |
|
(5,012,449) |
Increase
in unrealised gain |
|
|
|
8,250,717 |
|
23,624,711 |
(Increase)/decrease in unrealised loss |
|
(3,945,667) |
|
9,138,775 |
Net
gains on financial assets at fair value through profit or
loss |
20,309,231 |
|
34,804,266 |
9. Other receivables
|
|
|
|
As
at |
|
As
at |
|
|
|
|
30.09.17 |
|
31.03.17 |
|
|
|
|
£ |
|
£ |
|
|
|
|
(Unaudited) |
|
(Audited) |
Coupon
interest receivable |
|
2,751,109 |
|
3,174,960 |
Prepaid expenses |
|
|
|
22,576 |
|
2,544 |
|
|
|
|
2,773,685 |
|
3,177,504 |
10. Other payables
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
|
|
30.09.17 |
|
31.03.17 |
|
|
|
|
|
|
£ |
|
£ |
|
|
|
|
|
|
(Unaudited) |
|
(Audited) |
Portfolio
Management fees payable |
851,872 |
|
284,428 |
Custody
fee payable |
|
|
|
|
2,742 |
|
2,424 |
Administration and secretarial fees payable |
59,672 |
|
58,314 |
Directors'
fee payable |
|
|
|
31,526 |
|
31,526 |
Audit fee payable |
|
|
|
|
|
25,850 |
|
51,700 |
AIFM
Management fee payable |
|
37,157 |
|
36,751 |
Depositary
fees payable |
|
|
|
5,162 |
|
5,413 |
General
expenses payable |
|
|
30,093 |
|
110,087 |
|
|
|
|
|
|
1,044,074 |
|
580,643 |
11. Share Capital
Authorised Share Capital
Unlimited number of Ordinary Redeemable Shares at no par
value.
Issued Share Capital
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
|
|
|
30.09.17 |
|
31.03.17 |
|
|
|
|
|
|
|
£ |
|
£ |
Ordinary Redeemable Shares |
|
|
|
(Unaudited) |
|
(Audited) |
Share
Capital at the beginning of the period/year |
407,509,059 |
|
327,589,440 |
Issued
Share Capital |
|
|
|
|
|
- |
|
81,941,170 |
Share issue costs |
|
|
|
|
|
|
- |
|
(1,293,088) |
Shares
issued for repurchase |
|
|
- |
|
43,083,300 |
Purchase
of own shares to hold in treasury |
|
- |
|
(43,083,300) |
Income
equalisation on new issues |
|
- |
|
(728,463) |
Total
Share Capital at the end of the period/year |
407,509,059 |
|
407,509,059 |
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
|
|
|
30.09.17 |
|
31.03.17 |
|
|
|
|
|
|
|
Shares |
|
Shares |
Ordinary Redeemable Shares |
|
|
(Unaudited) |
|
(Audited) |
Shares at
the beginning of the period/year |
|
395,814,151 |
|
321,420,417 |
Issue of
Shares |
|
|
|
|
|
|
- |
|
74,393,734 |
Shares
issued for repurchase |
|
|
- |
|
39,000,000 |
Repurchase of own shares to hold in treasury |
- |
|
(39,000,000) |
Total
Shares in issue at the end of the period/year |
395,814,151 |
|
395,814,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at |
|
As
at |
|
|
|
|
|
|
|
30.09.17 |
|
31.03.17 |
|
|
|
|
|
|
|
Shares |
|
Shares |
Treasury
Shares |
|
|
|
|
|
|
(Unaudited) |
|
(Audited) |
Treasury
shares at the beginning of the period/year |
39,000,000 |
|
- |
Purchased shares |
|
|
|
|
|
|
- |
|
39,000,000 |
Total
Shares in issue at the end of the period/year |
39,000,000 |
|
39,000,000 |
The Share Capital of the Company consists of an unlimited number
of Shares with or without par value which, upon issue, the
Directors may designate as: Ordinary Redeemable Shares; Realisation
Shares or such other class as the Board shall determine and
denominated in such currencies as shall be determined at the
discretion of the Board.
As at 30 September 2017, one share
class has been issued, being the Ordinary Redeemable Shares of the
Company.
The Ordinary Redeemable Shares carry the following rights:
a) the Ordinary Redeemable Shares carry the right to
receive all income of the Company attributable to the Ordinary
Redeemable Shares.
b) the Shareholders present in person or by proxy or
present by a duly authorised representative at a
general meeting has, on a show of hands, one vote and, on a poll,
one vote for each Share held.
c) 56 days before the annual general meeting date of
the Company in each third year (the “Reorganisation Date”), the
Shareholders are entitled to serve a written notice (a “Realisation
Election”) requesting that all or a part of the Ordinary Redeemable
Shares held by them be redesignated to Realisation Shares, subject
to the aggregate NAV of the continuing Ordinary Redeemable Shares
on the last business day before the Reorganisation Date being not
less than £100 million. A Realisation Notice, once given is
irrevocable unless the Board agrees otherwise. If one or more
Realisation Elections be duly made and the aggregate NAV of the
continuing Ordinary Redeemable Shares on the last business day
before the Reorganisation Date is less than £100 million, the
Realisation will not take place. Shareholders do not have a right
to have their shares redeemed and shares are redeemable at the
discretion of the Board. The next realisation opportunity is due to
occur at the end of the next three year term in 2019.
The Company has the right to issue and purchase up to 14.99% of
the total number of its own shares at £0.01 each, to be classed as
Treasury Shares and may cancel those Shares or hold any such Shares
as Treasury Shares, provided that the number of Shares held as
Treasury Shares shall not at any time exceed 10% of the total
number of Shares of that class in issue at that time or such amount
as provided in the Companies Law.
On 24 January 2017, the Company
issued and purchased 39,000,000 Ordinary Shares of £0.01 at a price
of 110.47p, to be held in treasury. The total amount paid to
purchase these shares was £43,083,300 and has been deducted from
the shareholders’ equity. The Company has the right to re-issue
these shares at a later date. All shares issued were fully
paid.
Shares held in Treasury are excluded from calculations when
determining Earnings per Ordinary Redeemable Share or Net Asset
Value per Ordinary Redeemable Share, as detailed in notes 3 and
5.
12. Analysis of Financial Assets and
Liabilities by Measurement Basis
|
|
|
|
|
|
|
|
Assets at fair |
|
|
|
|
|
|
|
|
|
|
|
value
through |
Loans and |
|
|
|
|
|
|
|
|
|
|
profit and loss |
receivables |
|
Total |
|
|
|
|
|
|
|
|
£ |
|
£ |
|
£ |
|
30
September 2017 (Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets as per Statement of Financial Position |
|
|
|
|
|
|
|
Financial
assets at fair value through profit or loss: |
|
|
|
|
|
|
|
-
Investments |
|
|
|
|
|
|
455,120,234 |
|
- |
|
455,120,234 |
|
-
Derivative assets: Forward currency contracts |
|
21,753 |
|
- |
|
21,753 |
|
Amounts
due from broker |
|
|
|
|
|
|
- |
|
5,536,624 |
|
5,536,624 |
|
Other
receivables |
|
|
|
|
|
|
- |
|
2,773,685 |
|
2,773,685 |
|
Cash and
cash equivalents |
|
|
|
|
|
|
|
|
20,317,932 |
|
20,317,932 |
|
|
|
|
|
|
|
|
|
455,141,987 |
|
28,628,241 |
|
483,770,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities at fair |
Other |
|
|
|
|
|
|
|
|
|
|
value
through |
financial |
|
|
|
|
|
|
|
|
|
|
profit and loss |
liabilities |
|
Total |
|
|
|
|
|
|
|
|
£ |
|
£ |
|
£ |
|
Financial Liabilities as per Statement of Financial
Position |
|
|
|
|
|
|
|
Financial
liabilities at fair value through profit or loss: |
|
|
|
|
|
|
|
-
Derivative liabilities: Forward currency contracts |
116,766 |
|
- |
|
116,766 |
|
Amounts
due to brokers |
|
|
|
|
|
|
- |
|
21,258,238 |
|
21,258,238 |
|
Other
payables |
|
|
|
|
|
|
- |
|
1,044,074 |
|
1,044,074 |
|
|
|
|
|
|
|
|
|
116,766 |
|
22,302,312 |
|
22,419,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
value
through |
Loans and |
|
|
|
|
|
|
|
|
|
|
profit and loss |
receivables |
|
Total |
|
|
|
|
|
|
|
|
£ |
|
£ |
|
£ |
|
31 March
2017 (Audited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets as per Statement of Financial Position |
|
|
|
|
|
|
|
Financial
assets at fair value through profit or loss: |
|
|
|
|
|
|
|
-
Investments |
|
|
|
|
|
|
429,399,068 |
|
- |
|
429,399,068 |
|
-
Derivative assets: Forward currency contracts |
|
4,173,555 |
|
- |
|
4,173,555 |
|
Amounts
due from broker |
|
|
|
|
|
|
- |
|
6,117,241 |
|
6,117,241 |
|
Other
receivables |
|
|
|
|
|
|
- |
|
3,177,504 |
|
3,177,504 |
|
Cash and
cash equivalents |
|
|
|
|
|
|
- |
|
24,561,068 |
|
24,561,068 |
|
|
|
|
|
|
|
|
|
433,572,623 |
|
33,855,813 |
|
467,428,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities at fair |
Other |
|
|
|
|
|
|
|
|
|
|
value
through |
financial |
|
|
|
|
|
|
|
|
|
|
profit and loss |
liabilities |
|
Total |
|
|
|
|
|
|
|
|
£ |
|
£ |
|
£ |
Financial Liabilities as per Statement of Financial
Position |
|
|
|
|
|
|
Financial
liabilities at fair value through profit or loss: |
|
|
|
|
-
Derivative liabilities: Forward currency contracts |
163,495 |
|
- |
|
163,495 |
Amounts
due to brokers |
|
|
|
|
|
|
- |
|
14,072,249 |
|
14,072,249 |
Other
payables |
|
|
|
|
|
|
- |
|
580,643 |
|
580,643 |
|
|
|
|
|
|
|
|
163,495 |
|
14,652,892 |
|
14,816,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Related Parties
a) Directors’ Remuneration &
Expenses
The Directors of the Company are remunerated for their services
at such a rate as the Directors determine. The aggregate fees of
the Directors will not exceed £150,000.
The annual Directors’ fees comprise £35,000 payable to Mr Ash,
the Chairman, £32,500 to Mr Burns as Chairman of the Audit
Committee and £30,000 to Mr Burwood and Ms Etherden. During the
period ended 30 September 2017,
Directors fees of £63,750 (30 September
2016: £63,750) were charged to the Company, of which £31,526
(31 March 2017: £31,526) remained
payable at the end of the period.
b) Shares held by related parties
As at 30 September 2017, Directors
of the Company held the following shares beneficially:
|
Number of Shares |
Number of Shares |
|
30.09.17 |
31.03.17 |
Trevor Ash |
50,000 |
50,000 |
Ian Burns |
29,242 |
29,242 |
Richard Burwood |
5,000 |
5,000 |
Jeannette
Etherden |
25,000 |
25,000 |
As at 30 September 2017, the
Portfolio Manager held Nil Shares (31 March
2017: Nil Shares) and partners and employees of the
Portfolio Manager held 1,979,390 Shares (31
March 2017: 1,266,377 Shares), which is 0.50% (31 March 2017: 0.32%) of the Issued Share
Capital.
c) Portfolio Manager
The portfolio management fee is payable to the Portfolio
Manager, TwentyFour Asset Management LLP, monthly in arrears at a
rate of 0.75% per annum of the lower of Net Asset Value, which is
calculated weekly on each valuation day, or market capitalisation
of each class of shares. Total portfolio management fees for the
period amounted to £1,696,608
(30 September 2016: £1,361,602) of
which £851,872 (31 March 2017:
£284,428) is due and payable at the period end. The Portfolio
Management Agreement dated 29 May 2014 remains in force until
determined by the Company or the Portfolio Manager giving the other
party not less than twelve months' notice in writing. Under certain
circumstances, the Company or the Portfolio Manager is entitled to
immediately terminate the agreement in writing.
The Portfolio Manager is also entitled to a commission of 0.15%
of the aggregate gross offering proceeds plus any applicable VAT in
relation to any issue of new Shares, following admission, in
consideration of marketing services that it provides to the
Company. During the period, the Portfolio Manager received £Nil
(30 September 2016: £113,692) in
commission.
14. Material Agreements
a) Alternative Investment Fund
Manager
The Company’s Alternative Investment Fund Manager (the “AIFM”)
is Maitland Institutional Services Limited. In consideration for
the services provided by the AIFM under the AIFM Agreement the AIFM
is entitled to receive from the Company a minimum fee of £20,000
per annum and fees payable quarterly in arrears at a rate of 0.07%
of the Net Asset Value of the Company below £50 million, 0.05% on
Net Assets between £50 million and £100 million and 0.03% on Net
Assets in excess of £100 million. During the period ended
30 September 2017, AIFM fees of
£82,823 (30 September 2016: £70,835)
were charged to the Company, of which £37,157
(31 March 2017: £36,751) remained
payable at the end of the period.
b) Administrator and Secretary
Administration fees are payable to Northern Trust International
Fund Administration Services (Guernsey) Limited monthly in arrears
at a rate of 0.06% of the Net Asset Value of the Company below £100
million, 0.05% on Net Assets between £100 million and £200 million
and 0.04% on Net Assets in excess of £200 million as at the last
business day of the month subject to a minimum £75,000 each year.
In addition, an annual fee of £25,000 will be charged for corporate
governance and company secretarial services. Total administration
and secretarial fees for the period amounted to £117,910
(30 September 2016: £100,161) of
which £59,672
(31 March 2017: £58,314) is due and
payable at the period end.
c) Depositary
Depositary fees are payable to Northern Trust (Guernsey)
Limited, monthly in arrears, at a rate of 0.0175% of the Net Asset
Value of the Company up to £100 million, 0.0150% on Net Assets
between £100 million and £200 million and 0.0125% on Net Assets in
excess of £200 million as at the last business day of the month
subject to a minimum £25,000 each year. Total depositary fees and
charges for the period amounted to £32,017 (30 September 2016: £26,485) of which £5,162
(31 March 2017: £5,413) is due and
payable at the period end.
The Depositary is also entitled to a Global Custody fee of a
minimum of £8,500 per annum plus transaction fees. Total Global
Custody fees and charges for the period amounted to £22,621
(30 September 2016: £19,929) of which
£2,742 (31 March 2017: £2,424) is due
and payable at the period end.
15. Financial Risk Management
The Company’s activities expose it to a variety of financial
risks: market risk (including price risk, interest rate risk,
foreign currency risk and reinvestment risk), credit risk,
liquidity risk, and capital risk.
These Unaudited Condensed Interim Financial Statements do not
include all financial risk management information and disclosures
required in the annual financial statements; they should be read in
conjunction with the Company’s annual financial statements for the
year ended 31 March 2017.
16. Fair Value Measurement
All assets and liabilities are carried at fair value or at
carrying value which equates to fair value.
IFRS 13 requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
has the following levels:
(i) Quoted prices (unadjusted) in
active markets for identical assets or liabilities (level 1).
(ii) Inputs other than quoted prices
included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that
is, derived from prices including interest rates, yield curves,
volatilities, prepayment speeds, credit risks and default rates) or
other market corroborated inputs (level 2).
(iii) Inputs for the asset or liability that are not
based on observable market data (that is, unobservable inputs)
(level 3).
The following tables analyse within the fair value hierarchy the
Company’s financial assets and liabilities (by class) measured at
fair value for the period and year ended 30
September 2017 and 31 March 2017.
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
£ |
|
£ |
|
£ |
|
£ |
Assets |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
Financial
assets at fair value through profit or loss: |
|
|
|
|
|
|
|
Asset Backed
Securities: |
|
|
|
|
|
|
|
|
Buy-to-Let
RMBS |
|
- |
|
45,595,761 |
|
3,500,000 |
|
49,095,761 |
CMBS |
|
- |
|
5,709,080 |
|
- |
|
5,709,080 |
Consumer
ABS |
|
- |
|
34,196,710 |
|
3,541,833 |
|
37,738,543 |
Leveraged Loan
CLO |
|
- |
|
145,320,127 |
|
18,620,764 |
|
163,940,891 |
Non-Conforming
RMBS |
|
- |
|
107,881,465 |
|
24,475,870 |
|
132,357,335 |
Prime RMBS |
|
- |
|
54,281,152 |
|
11,196,022 |
|
65,477,174 |
Student
Loans |
|
- |
|
801,450 |
|
- |
|
801,450 |
Forward currency
contracts |
|
- |
|
21,753 |
|
- |
|
21,753 |
Total
assets as at 30 September 2017 |
- |
|
393,807,498 |
|
61,334,489 |
|
455,141,987 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Financial
liabilities at fair value through profit or loss: |
|
|
|
|
|
|
|
Forward
currency contracts |
- |
|
116,766 |
|
- |
|
116,766 |
Total
liabilities as at 30 September 2017 |
- |
|
116,766 |
|
- |
|
116,766 |
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
£ |
|
£ |
|
£ |
|
£ |
Assets |
|
(Audited) |
|
(Audited) |
|
(Audited) |
|
(Audited) |
Financial
assets at fair value through profit or loss: |
|
|
|
|
|
|
|
Asset Backed
Securities: |
|
|
|
|
|
|
|
|
Buy-to-Let
RMBS |
|
- |
|
26,151,150 |
|
3,521,770 |
|
29,672,920 |
CMBS |
|
- |
|
6,380,449 |
|
- |
|
6,380,449 |
Consumer
ABS |
|
- |
|
17,381,807 |
|
19,375,719 |
|
36,757,526 |
Leveraged Loan
CLO |
|
- |
|
142,981,296 |
|
11,236,233 |
|
154,217,529 |
Non-Conforming
RMBS |
|
- |
|
115,564,375 |
|
3,800,826 |
|
119,365,201 |
Prime RMBS |
|
- |
|
80,760,181 |
|
1,411,834 |
|
82,172,015 |
Student
Loans |
|
- |
|
833,428 |
|
- |
|
833,428 |
Forward currency
contracts |
|
- |
|
4,173,555 |
|
- |
|
4,173,555 |
Total assets as at
31 March 2017 |
|
- |
|
394,226,241 |
|
39,346,382 |
|
433,572,623 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Financial
liabilities at fair value through profit or loss: |
|
|
|
|
Forward
currency contracts |
- |
|
163,495 |
|
- |
|
163,495 |
Total
liabilities as at 31 March 2017 |
- |
|
163,495 |
|
- |
|
163,495 |
Asset Backed Securities which have a value based on quoted
market prices in active markets are classified in level 1. At the
end of the period, no Asset Backed Securities held by the Company
are classified as level 1.
Asset Backed Securities which are not traded or dealt on
organised markets or exchanges are classified in level 2 or level
3. Asset Backed securities priced at cost are classified as level
3. Asset Backed securities with prices obtained from independent
price vendors, where the Portfolio Manager is able to assess
whether the observable inputs used for their modelling of prices is
accurate and the Portfolio Manager has the ability to challenge
these vendors with further observable inputs, are classified as
level 2. Prices obtained from vendors who are not easily
challengeable or transparent in showing their assumptions for the
method of pricing these assets, are classified as level 3. Asset
Backed Securities priced at an average of two vendors’ prices are
classified as level 3.
Where the Portfolio Manager determines that the price obtained
from an independent price vendor is not an accurate representation
of the fair value of the Asset Backed Security, the Portfolio
Manager may source prices from third party broker or dealer quotes
and if the price represents a reliable and an observable price, the
Asset Backed Security is classified in level 2. Any broker quote
that is over 20 days old is considered stale and is classified as
level 3.
There were no transfers between level 1 and 2 during the year,
however transfers from level 2 to level 3 and from level 3 to level
2 occurred based on the Portfolio Manager’s ability to obtain a
reliable and observable price as detailed above.
Due to the inputs into the valuation of Asset Backed Securities
classified as level 3 not being available or visible to the
Company, no meaningful sensitivity on inputs can be performed.
The following tables present the movement in level 3 instruments
for the periods ended
30 September 2017 and 31 March 2017 by class of financial
instrument.
|
Opening
balance |
Net
Purchases /(sales) |
Net realised gain/(loss) for the period included in the
Statement of Comprehensive Income for level 3 Investments held at
30 September 2017 |
Net unrealised gain/(loss) for the period included in the
Statement of Comprehensive Income for level 3 Investments held at
30 September 2017 |
Transfer into Level 3 |
Transfer out Level 3 |
Closing balance |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
(Unaudited) |
(Unaudited) |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
Buy-to-Let
RMBS |
3,521,770 |
- |
1,392 |
(23,162) |
- |
- |
3,500,000 |
|
Consumer
ABS |
19,375,719 |
(8,404,474) |
941,314 |
(213,945) |
- |
(8,156,781) |
3,541,833 |
|
Leveraged Loan
CLO |
11,236,233 |
18,208,779 |
207,130 |
204,852 |
- |
(11,236,230) |
18,620,764 |
|
Non-Conforming
RMBS |
3,800,826 |
9,812,289 |
117,917 |
663,760 |
13,881,905 |
(3,800,827) |
24,475,870 |
|
Prime RMBS |
1,411,834 |
2,819,516 |
(278,742) |
1,007,133 |
7,648,117 |
(1,411,836) |
11,196,022 |
|
Total at 30
September 2017 |
39,346,382 |
22,436,110 |
989,011 |
1,638,638 |
21,530,022 |
(24,605,674) |
61,334,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
Net
Purchases /(sales) |
Net
realised gain/(loss) for the year included in the Statement of
Comprehensive Income for level 3 Investments held at 31 March
2017 |
Net
unrealised gain/(loss) for the year included in the Statement of
Comprehensive Income for level 3 Investments held at 31 March
2017 |
Transfer into Level 3 |
Transfer out Level 3 |
Closing
balance |
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
(Audited) |
(Audited) |
(Audited) |
(Audited) |
(Audited) |
(Audited) |
(Audited) |
Buy-to-Let
RMBS |
- |
(2,017,018) |
67,152 |
(8,113) |
5,479,749 |
- |
3,521,770 |
CMBS |
- |
(973,931) |
(10,542) |
24,400 |
960,073 |
- |
- |
Consumer
ABS |
- |
19,165,711 |
8,746 |
201,262 |
- |
- |
19,375,719 |
Leases |
- |
(8,154,565) |
1,215,073 |
90,413 |
6,849,079 |
- |
- |
Leveraged Loan
CLO |
25,025,496 |
(60,120,439) |
9,286,434 |
1,872,148 |
52,848,703 |
(17,676,109) |
11,236,233 |
Non-Conforming
RMBS |
- |
(21,409,645) |
2,301,681 |
141,765 |
22,767,025 |
- |
3,800,826 |
Peripheral
RMBS |
1,786,704 |
(13,318,258) |
1,434,630 |
(360,192) |
10,457,116 |
- |
- |
Prime RMBS |
2,263,309 |
1,047,225 |
367,356 |
(2,746) |
- |
(2,263,310) |
1,411,834 |
Total at 31 March
2017 |
29,075,509 |
(85,780,920) |
14,670,530 |
1,958,937 |
99,361,745 |
(19,939,419) |
39,346,382 |
|
|
|
|
|
|
|
|
|
The following tables analyse within the fair value hierarchy the
Company’s assets and liabilities not measured at fair value at
30 September 2017 and 31 March 2017 but for which fair value is
disclosed.
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
£ |
|
£ |
|
£ |
|
£ |
Assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
20,317,932 |
|
- |
|
- |
|
20,317,932 |
Amounts
due from broker |
|
|
|
- |
|
5,536,624 |
|
- |
|
5,536,624 |
Other receivables |
|
|
|
|
- |
|
2,773,685 |
|
- |
|
2,773,685 |
Total
assets as at 30 September 2017 |
20,317,932 |
|
8,310,309 |
|
- |
|
28,628,241 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Amounts
due to brokers |
|
|
|
- |
|
21,258,238 |
|
- |
|
21,258,238 |
Other payables |
|
|
|
|
- |
|
1,044,074 |
|
- |
|
1,044,074 |
Total
liabilities as at 30 September 2017 |
- |
|
22,302,312 |
|
- |
|
22,302,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
|
Total |
|
|
|
|
|
(Audited) |
|
(Audited) |
|
(Audited) |
|
(Audited) |
|
|
|
|
|
£ |
|
£ |
|
£ |
|
£ |
Assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
24,561,068 |
|
- |
|
- |
|
24,561,068 |
Amounts
due from brokers |
|
|
|
- |
|
6,117,241 |
|
- |
|
6,117,241 |
Other receivables |
|
|
|
|
- |
|
3,177,504 |
|
- |
|
3,177,504 |
Total
assets as at 31 March 2017 |
24,561,068 |
|
9,294,745 |
|
- |
|
33,855,813 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Amounts
due to brokers |
|
|
|
- |
|
14,072,249 |
|
- |
|
14,072,249 |
Other payables |
|
|
|
|
- |
|
580,643 |
|
- |
|
580,643 |
Total
liabilities as at 31 March 2017 |
- |
|
14,652,892 |
|
- |
|
14,652,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assets and liabilities included in the above table are
carried at amortised cost; their carrying values are a reasonable
approximation of fair value.
Cash and cash equivalents include cash in hand and deposits held
with banks.
Amounts due to brokers and other payables represent the
contractual amounts and obligations due by the Company for
settlement of trades and expenses. Amounts due from brokers and
other receivables represent the contractual amounts and rights due
to the Company for settlement of trades and income.
17. Segmental Reporting
The Board is responsible for reviewing the Company’s entire
portfolio and considers the business to have a single operating
segment. The Board’s asset allocation decisions are based on a
single, integrated investment strategy, and the Company’s
performance is evaluated on an overall basis.
The Company invests in a diversified portfolio of Asset Backed
Securities. The fair value of the major financial instruments held
by the Company and the equivalent percentages of the total value of
the Company, are reported in the Top Twenty Holdings, included
within the Interim Management Report.
Revenue earned is reported separately on the face of the Unaudited
Condensed Statement of Comprehensive Income as investment income
being interest income received from Asset Backed Securities.
18. Dividend Policy
The Board intends to distribute an amount at least equal to the
value of the Company’s net income arising each quarter to the
holders of Ordinary Redeemable Shares. For these purposes, the
Company’s income will include the interest payable by the Asset
Backed Securities in the Portfolio and the amortisation of any
discount or premium to par at which an Asset Backed Security is
purchased over its remaining expected life, prior to its maturity,
however there is no guarantee that the dividend target for future
financial years will be met or that the Company will make any
distributions at all.
Distributions made with respect to any income period comprise
(a) the accrued income of the portfolio for the period, and (b) an
additional amount to reflect any income purchased in the course of
any share subscriptions that took place during the period.
Including purchased income in this way ensures that the
income yield of the shares is not diluted as a consequence of the
issue of new shares during an income period and (c) any income on
the foreign exchange contracts created by the LIBOR differentials
between each foreign currency pair.
The Board expects that dividends will constitute the principal
element of the return to the holders of Ordinary Redeemable
Shares.
The Company declared the following dividends in respect of
distributable profit for the period ended 30
September 2017:
Period to |
Dividend rate per Share (pence) |
Net dividend payable (£) |
Record date |
|
Ex-dividend date |
|
Pay date |
30 June 2017 |
0.015 |
|
5,937,212 |
|
21 July
2017 |
|
20 July 2017 |
|
31 July 2017 |
|
29 September 2017 |
0.015 |
|
5,937,212 |
|
20
October 2017 |
|
19 October 2017 |
|
31 October 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under the Companies (Guernsey) Law, 2008, the Company can
distribute dividends from capital and revenue reserves, subject to
the net asset and solvency test. The net asset and solvency test
considers whether a company is able to pay its debts when they fall
due, and whether the value of a company’s assets is greater than
its liabilities. The Board confirms that the Company passed the net
asset and solvency test for each dividend paid.
19. Ultimate Controlling Party
In the opinion of the
Directors on the basis of shareholdings advised to them, the
Company has no ultimate controlling party.
20. Subsequent Events
These Financial Statements were approved for issuance by the
Board on 15 November 2017. Subsequent
events have been evaluated until this date.
On 31 October 2017, the Company
paid a dividend as detailed in note 18.
CORPORATE INFORMATION
Directors
Trevor Ash (Chairman)
Ian Burns
Richard Burwood
Jeannette Etherden |
Custodian, Principal Banker and Depositary
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey, GY1 3DA |
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey, GY1 3QL |
Administrator and Company Secretary
Northern Trust International Fund Administration
Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey, GY1 3QL |
Alternative Investment Fund Manager (“AIFM”)
Maitland Institutional Services Limited
Springfield Lodge
Colchester Road
Chelmsford, CM2 5PW |
Broker
and Financial Adviser
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London, EC4M 7LT |
Portfolio Manager
TwentyFour Asset Management LLP
8th Floor, The Monument Building
11 Monument Street,
London
EC3R 8AF |
Independent Auditor
PricewaterhouseCoopers CI LLP
PO Box 321
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey, GY1 4ND |
UK
Legal Advisers to the Company
Eversheds Sutherland (International) LLP
One Wood Street
London, EC2V 7WS |
Receiving Agent
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol, BS13 8AE |
|
|
Guernsey Legal Advisers to the Company
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey, GY1 4BZ |
Registrars
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey, GY1 1DB |
|
|
|
|